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In: Economics

If a perfectly competitive market moved toward monopolistic competition, we might expect less advertising. a smaller...

If a perfectly competitive market moved toward monopolistic competition, we might expect

  • less advertising.

  • a smaller range of product differentiation, but a lower price.

  • a greater range of product innovation and a lower price.

  • a greater range of product differentiation, but a higher price.

Solutions

Expert Solution

A greater range of product differentiation, but a higher price.

Perfect competition refers to a market situation where the products are homogeneous or identical because of which the price of the product is fixed by the market or the firm has no influence over the price and cannot charge higher prices.

Monopolistic competition refers to a market situation where firms sell differentiated products because of which they can influence the market price and can charge higher price.

So when perfect market competition move towards monopolistic competition we might expect a greater range of product differentiation, but a higher price.

Rahul Sunny answered 2 years ago
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